[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
THE ROLE OF THE SBA's 8(a) PROGRAM IN ENHANCING ECONOMIC OPPORTUNITIES
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HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
SEPTEMBER 18, 2019
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 116-044
Available via the GPO Website: www.govinfo.gov
___________
U.S. GOVERNMENT PUBLISHING OFFICE
37-638 WASHINGTON : 2020
HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
ABBY FINKENAUER, Iowa
JARED GOLDEN, Maine
ANDY KIM, New Jersey
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
JUDY CHU, California
MARC VEASEY, Texas
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
ADRIANO ESPAILLAT, New York
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANGIE CRAIG, Minnesota
STEVE CHABOT, Ohio, Ranking Member
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
TRENT KELLY, Mississippi
TROY BALDERSON, Ohio
KEVIN HERN, Oklahoma
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
TIM BURCHETT, Tennessee
ROSS SPANO, Florida
JOHN JOYCE, Pennsylvania
Adam Minehardt, Majority Staff Director
Melissa Jung, Majority Deputy Staff Director and Chief Counsel
Kevin Fitzpatrick, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Nydia Velazquez............................................. 1
Hon. Steve Chabot................................................ 2
WITNESSES
Mr. Ralph C. Thomas III, Executive Director Emeritus &
Representative of the National Association of Minority
Contractors (NAMC), Lawyer, Law Offices of Ralph C. Thomas III
PLLC, Washington, DC........................................... 5
Ms. Dottie Li, Founder and CEO, TransPacific Communications,
Cheverly, MD................................................... 6
Mr. Clarence McAllister, CEO, Fortis Networks, Phoenix, AZ....... 7
Ms. Rebecca Askew, CEO & General Counsel, Circuit Media LLC,
Denver, CO..................................................... 9
APPENDIX
Prepared Statements:
Mr. Ralph C. Thomas III, Executive Director Emeritus &
Representative of the National Association of Minority
Contractors (NAMC), Lawyer, Law Offices of Ralph C. Thomas
III PLLC, Washington, DC................................... 25
Ms. Dottie Li, Founder and CEO, TransPacific Communications,
Cheverly, MD............................................... 41
Mr. Clarence McAllister, CEO, Fortis Networks, Phoenix, AZ... 49
Ms. Rebecca Askew, CEO & General Counsel, Circuit Media LLC,
Denver, CO................................................. 52
Questions and Answers for the Record:
Questions from Hon. Nydia Velazquez to Mr. Ralph C. Thomas
III and Answers from Mr. Ralph C. Thomas III............... 57
Questions from Hon. Nydia Velazquez to Ms. Dottie Li and
Answers from Ms. Dottie Li................................. 60
Questions from Hon. Nydia Velazquez to Ms. Rebecca Askew and
Answers from Ms. Rebecca Askew............................. 63
Additional Material for the Record:
IEEE-USA..................................................... 65
THE ROLE OF THE SBA'S 8(A) PROGRAM IN ENHANCING ECONOMIC OPPORTUNITIES
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WEDNESDAY, SEPTEMBER 18, 2019
House of Representatives,
Committee on Small Business,
Washington, DC.
The committee met, pursuant to call, at 11:31 a.m., in Room
2360, Rayburn House Office Building. Hon. Nydia Velazquez
[chairwoman of the Committee] presiding.
Present: Representatives Velazquez, Finkenauer, Golden,
Kim, Davids, Chu, Evans, Delgado, Houlahan, Craig, Chabot,
Balderson, Hern, Stauber, Spano, and Joyce.
Chairwoman VELAZQUEZ. Good morning. The committee will come
to order.
I want to thank everyone for joining us this morning, and I
want to especially thank the witnesses for being here. Today we
are here because of the enormous role the federal government
plays as a customer. In fact, it purchased over $550 billion of
goods and services last year.
Whether it is rebuilding roads, outfitting offices with
21st century technology, or creating cutting-edge equipment for
our medical laboratories or armed services, small firms are
producing the innovative and quality products the federal
government is looking to buy.
Which brings me to why we are here today. Those who have
been following the committee closely know that it is a top
priority for both the Ranking Member and myself to ensure that
the federal government is receiving contract bids from small
businesses and that those firms have the resources they need to
understand the federal contracting process.
That is why Congress created government-wide contracting
goals which require federal agencies to award a percentage of
contracts to historically underserved populations. Our
committee has already held hearings on how to strengthen SBA
initiatives to increase access to the federal marketplace for
women and veteran-owned businesses.
Today we will be taking an overdue examination of the Small
Business and Capital Ownership Development Program, more
commonly known as the ``8(a)'' program. The 8(a) program
provides small firms owned by socially and economically
disadvantaged individuals with increased access to the federal
marketplace, procurement training, technical assistance, and
the ability to be paired with a mentor. The government also has
a goal to award 5 percent of all prime and subcontracting
dollars to small disadvantaged businesses, including 8(a)
certified firms.
Its purpose is simple: to promote the development and
competitiveness of small businesses looking to contract with
the federal Government. Make no mistake, minority-owned
businesses continue to be a driving force in our economy.
According to the SBA 2018 Small Business Profile, there are 8
million minority-owned small businesses in the United States.
These small businesses accounted for almost 30 percent of all
firms, contributed $1.38 trillion in revenue, and make up over
7.2 million jobs in the United States.
However, this progress has not been accomplished without
hardships along the way. While some may want to minimize the
barriers created by discrimination, that does not make it any
less real. Throughout our nation's history, minorities have
suffered the effects of discriminatory practices in access to
affordable credit, housing, criminal justice, and education.
Consequently, the path to starting and running a business for
minority entrepreneurs has been difficult. The 8(a) program was
designed to make it just a little easier, while also
encouraging minority entrepreneurship and further improving the
federal marketplace as a whole.
Over 40 years ago, Congress determined that the opportunity
for full participation in the federal marketplace is essential
if we are to obtain social and economic equality and have an
economy that works for everyone. This premise, which remains as
true today as it was more than 40 years ago, is the reason why
I am committed to making sure that the 8(a) program works as
intended.
Given how critical this program is to our nation's
wellbeing, I am troubled by ongoing problems.
Over the past few years, the SBA's Office of Inspector
General identified issues that we will discuss today. For
example, despite a rise in contract dollars to 8(a)
participants, the number of 8(a) firms remains in decline. We
need more 8(a) firms, not fewer. To reverse this trend, we need
to understand why fewer owners are utilizing this program so
this committee can ensure eligible firms have the necessary
resources and tools to become certified and win contracts.
Getting certified is just the beginning and is not a
guarantee for winning an award. We need to make sure the SBA
will aid, monitor, and support the business development needs
of 8(a) firms for the duration of their time in the program.
Finally, it is time we look closely at ways to modernize
the program to bring it into the 21st century. It is my hope
today's hearing will help us determine if things like the
standard for net worth, which has not changed in over 30 years,
adequately reflects the reality of our times.
Today's hearing will give this committee an opportunity to
discuss what can be done to best serve the 8(a) community.
I thank all of our witnesses for their attendance and
insights into this important topic. I now yield to the Ranking
Member, Mr. Chabot, for his opening statement.
Mr. CHABOT. Thank you, Madam Chairwoman, for holding this
important hearing on a program that means so much to so many
disadvantaged entrepreneurs across the country.
The 8(a) program is a crucial component of the SBA's
arsenal of small business programs. Given that it is the
longest running and most well established business development
program maintained by the SBA, taking the time to revisit this
program today is certainly a worthwhile undertaking.
The Federal Government has long recognized the policy that
the government should aid, counsel, assist, and protect the
interests of small business concerns. However, special
recognition has been given to the socially and economically
disadvantaged. The Federal Government, through the Small
Business Act, recognizes the opportunity for full participation
in our free enterprise system by socially and economically
disadvantaged persons is essential to obtaining equality and
improving the function of our national economy.
The 8(a) program was developed with this policy goal in
mind, creating a prospective space for these types of firms to
grow and succeed so they may later rise to become fully,
capable, competent, competitive, and productive members of our
Nation's workforce.
To further spur economic growth among this group of
businesses, the Federal Government imposes a statutory goal of
awarding at least 5 percent of all prime and subcontracting
dollars to a socially and economically disadvantaged firm.
According to the SBA, this goal was exceeded in fiscal year
2018 with nearly $46.5 billion dollars being awarded to small,
disadvantaged businesses.
While these numbers seem to indicate a measure of success,
it is important for us to take the time today to really grasp
the human aspect of this Federal program. Applying to become an
8(a) eligible program is not an easy task. These entrepreneurs
must face that they have faced substantial hardship in their
lives and careers in order to qualify for the program. In
addition, they must continue to show demonstrated success year
after year in order to remain in good standing. The success of
these businesses also translates directly to broader benefits,
whether in the form of increasing the number of jobs in the
local area or amplifying economic activity within their
communities.
Given that these businesses only have 9 years to
participate in this program, it is incumbent on us as members
of this Committee to ensure that the program is effectively
acting as a launch pad for sustained success.
That is why again today's hearing is so important. Not only
do we need to devote time to hear from our witnesses, the
successes that this program can bring for socially and
economically disadvantaged entrepreneurs, we also need to
understand where improvements can be made to ensure that the
program is operating optimally and fairly. It is in the best
interest of our Nation's economy and the very fabric of our
communities to ensure that this program yields high quality,
productive, and successful small disadvantaged businesses and
entrepreneurs.
I want to thank you, Madam Chairwoman, for holding this
hearing, and I yield back.
Chairwoman VELAZQUEZ. Thank you, Mr. Chabot. The gentleman
yields back.
If committee members have an opening statement prepared, we
ask that they be submitted for the record.
I would like to just take a minute to explain the timing
rules. Each witness gets 5 minutes to testify and each member
gets 5 minutes for questioning. There is a lighting system to
assist you. The green light will be on when you begin, and the
yellow light will come on when you have 1 minute remaining. The
red light will come on when you are out of time, and we ask
that you stay within the timeframe to the best of your ability.
I would now like to introduce our witnesses.
Our first witness is Mr. Ralph C. Thomas, III, Executive
Director Emeritus and Representative of the National
Association of Minority Contractors. He is also a government
contracts litigator, who focuses his practice on legal issues
affecting small businesses in the federal contracting arena,
including the SBA's 8(a) Business Development Program. From
1992 to 2005, Mr. Thomas was the Associate Administrator for
Small and Disadvantaged Business Utilization at NASA in
Washington, D.C., where he reported directly to the head of
NASA. He received his Juris Doctor degree from Harvard Law
School and his Bachelor of Arts degree with honors from the
University of California at Berkeley. Welcome, Mr. Thomas.
Our second witness is Ms. Dottie Li, the founder and CEO of
TransPacific Communications, an SBA 8(a) company. Prior to
becoming CEO, Ms. Li moved from broadcast and print journalism
to work as a corporate spokesperson and public relations
executive. She then served at the White House handling media
advance assignments for presidential trips and later as a
communication chief for several large national and
international nonprofit organizations. Just last year, Ms. Li
was recognized as one of ``Maryland's Top 100 Women'' in 2015
by the Daily Record. Welcome, Ms. Li.
Our next witness today is Mr. Clarence McAllister. Mr.
McAllister is the cofounder and CEO of Fortis Networks, a
former 8(a) company that provides general construction
services. He started the company in 2000 after an engineering
career and today has 120 employees across seven states. Mr.
McAllister has more than 30 years of experience in all facets
of the construction industry. He holds a Master of Business
Administration from Nova Southeastern University and both a
Bachelor and a Master of Science in electrical engineering from
Arizona State University. Welcome, sir.
I yield to the Ranking Member to introduce our final
witness.
Mr. CHABOT. Thank you, Madam Chair.
Our final witness today will be Ms. Rebecca Askew, founder
and CEO of Circuit Media, LLC. Circuit Media was established in
2002 and is dually based in both Denver and Washington, D.C. It
is a certified 8(a) small disadvantaged business and an
economically disadvantaged woman-owned small business, and the
company supplies goods and services at the state and Federal
level. Before founding Circuit Media, Ms. Askew served as
corporate counsel for an international media technology
company, started her own litigation law firm, and served as a
government prosecutor. She earned her B.A. from the University
of Iowa and J.D. from the University of Denver, Sturm College
of Law. In addition, Ms. Askew received training in change
management and design thinking from Harvard University. We
thank you for your participation today, Ms. Askew.
We look forward to hearing from all the witnesses here this
morning, and I yield back.
Chairwoman VELAZQUEZ. Thank you, Mr. Chabot.
Mr. Thomas, you are recognized for 5 minutes.
STATEMENTS OF RALPH C. THOMAS III, EXECUTIVE DIRECTOR EMERITUS
& REPRESENTATIVE OF THE NATIONAL ASSOCIATION OF MINORITY
CONTRACTORS (NAMC), LAWYER, LAW OFFICES OF RALPH C. THOMAS III
PLLC; DOTTIE LI, FOUNDER AND CEO, TRANSPACIFIC COMMUNICATIONS;
CLARENCE MCALLISTER, CEO, FORTIS NETWORKS; REBECCA ASKEW, CEO &
GENERAL COUNSEL, CIRCUIT MEDIA LLC
STATEMENT OF RALPH C. THOMAS, III
Mr. THOMAS. Good morning, Madam Chairman, and other members
of this distinguished Committee.
My name, as was stated, is Ralph Thomas, and I am here on
behalf of the National Association of Minority Contractors. We
are celebrating our 50th anniversary this year and we are the
oldest minority construction trade association in the U.S. Our
organization advocates on behalf of the near 100,000 minority
construction contractors across the U.S. As was mentioned, I am
also an attorney, who represents minority contractors in
government contracting issues. And as was stated, I was the AA
for the NASA Small and Disadvantaged Business Office from 1992
to 2005. Now, our written testimony, and I will just summarize
because you have it in front of you, but it is based, it is
broken into five parts. One in which we express our strong
support for the 8(a) program. Though it is sometimes flawed, it
nevertheless provides the best vehicle for minority contractors
to break into government contracting. And for the reasons that
I have laid out in the written testimony, we feel that the
Mentor-Protege Program, particularly the part that allows
minority contractors or 8(a) contractors to obtain joint
ventures with large contractors, it allows them to evolve to a
higher level of government contracting.
The second part of our testimony I have provided a short
history of the 8(a) program for the newer members of this
Committee.
Third, I have given an illustration of 8(a)'s contractors'
best successes. When I began as executive director of NAMC in
1985, 8(a) firms were primarily used by Federal agencies to
perform small contracts and construction, administrative
contract support, and janitorial maintenance contracts.
However, when I served as the head of NASA's Small Business
Program from 1992 to 2005, I watched 8(a) contractors perform
such a mission, critical activities as developing subsystems
for complex spacecraft, assisting in building nonrocket-powered
vehicles to fly at hypersonic speed, and manufacturing hardware
or the international space station. So they were also more
involved in more complex service-oriented contracts, such as
space shuttle related software development, safety and mission
assurance, systems engineering. So I proudly observed the
continued success of some of these companies that have
graduated from the 8(a) program and are still performing at a
high level.
The fourth part of my statement of my written testimony, we
have commented to a limited degree on the last OIG report
regarding the 8(a) program. And you can see that for yourself.
And if you want me to elaborate I will.
Finally, we have listed some of our concerns and
suggestions for improvements to the program. For example, we
are concerned about those contractors that are left behind.
Most 8(a) contractors do not, in fact, receive contracts, you
know, during their tenure. And we are very concerned about
that.
We also request that this Committee follow up on a study of
graduated 8(a) firms. The last one done was in 1988 by the
Senate Committee on Small Business. We are concerned that the
contracts are getting so large that smaller 8(a) firms are
being left out.
This does not concern this Committee, but we are hearing
about disparate treatment of African American and Latino women-
owned businesses and the DOT Program. We have a few concerns
about the Protege Program, and we would also like to nail down
the nonprocurement assistance to 8(a) contracts, financial,
technical, and management support from the agency.
That ends my oral testimony. And once again, thank you for
allowing me to testify today. And I am now ready for any
questions you might have.
Mr. EVANS. [Presiding] Thank you, Mr. Thomas.
Ms. Li, you are now recognized for 5 minutes.
STATEMENT OF DOTTIE LI
Ms. LI. Thank you.
Good morning, Chairwoman Velazquez, Vice Chair Evans,
Ranking Member Chabot, and each member of this Committee. It is
an honor to speak with you. I am also pleased to appear before
Representative Chu, Chair of CAPAC, and along with
Representative Kim, who I have also met.
It is almost a full year since my company, TransPacific
Communications, became an 8(a). It also has been almost one
full year since TransPacific Communications has yet to receive
an 8(a) contract. Why the delay? I believe there is a critical
gap between the SBA 8(a) policy which is great and the
operations. Operational movement at agency level would greatly
enhance a new 8(a) firm, like TransPacific Communications, in
obtaining 8(a) contracts.
I am here today to present my perspective as a new 8(a)
company and the challenges we face in the system. More
importantly, I am here to offer some suggestions I believe will
make the 8(a) program better to reduce and eliminate the gap
between policy and operation.
I was born and raised in China, a little girl who dreamed
of going to America and becoming a Voice of America
broadcaster. I struggled when I got here. The culture shock of
finding myself in Mobile, Alabama, my accent, a combination of
British-taught English overlaying my Chinese intonation and now
marinated in a southern drawl.
After finishing my graduation, I landed my very first job
as a broadcaster at Voice of America two blocks from here. When
I later became a corporate spokesperson, I worked hard with a
professional coach to clear up my speech. I found my speaking
voice, the one allowing me to sound natural and credible. This
did not wash away my Asian identity; it added a layer of my new
American identity to it. It was a life-changing experience. It
also helped me discover my calling.
Many in the Asian-American and other immigrant communities
have the same experience that we excel academically, get good
jobs, perform well, but many fail to achieve our full
potential, and are unable to fully contribute in the workplace
and in society.
Many of the employers and managers are also frustrated.
They see talent and drive that is hindered by poor
communication skills and cultural barriers on both sides. I
became certified to train others so they could transform their
lives and careers as I did, and TransPacific Communications was
born.
We serve several different industries, corporations, and
higher education, and many Federal agencies. You have a long
list of those. But even with the support of satisfied agency
managers, I had to find a way to grow and scale so that we
could help more Federal workers, and 8(a) appeared to be the
solution.
I started looking into the 8(a) application process in late
2017. The process is daunting and lengthy. After submitting the
complex application, it was wait and wait and wait. Finally, an
SBA official intervened and introduced me directly to the
person who handled my file. It took too many more months, but
then on September 25, 2018, we finally got the 8(a)
certificate. I was elated and ready to go.
An 8(a) sole source BPA contract with an agency was
supposedly ready for me. I began planning, allocating resources
and staff, but nothing happened. No movement.
I would like to offer some suggestions in the hope of
improving the process for others.
One is to put a check-in mechanism in place that allows
8(a) firms to move in a timely fashion. It will also hold
agencies accountable while SBA provides oversight to avoid 8(a)
firms being left in limbo. It is critical that operations be
empowered in order for 8(a) firms to successfully obtain
contracts. Coordination, collaboration, and team work among SBA
contracting agencies and 8(a) participants must be improved.
Strengthening the mentoring of 8(a) participants is needed
during the contracting process between contractor and
subcontractor and outside of any contract relationship.
I am grateful to be in the 8(a) program. It has given us a
good platform as we wait to experience its full potential as we
contribute to our economy and fulfill the mission to serve
others. I offer my full statement for the record, and I am
happy to answer any questions.
Thank you, Chairwoman, thank you Vice Chair, thank you
Ranking Member and the entire Committee.
Mr. EVANS. Thank you, Ms. Li.
Mr. McAllister, you are now recognized for 5 minutes.
STATEMENT OF CLARENCE MCALLISTER
Mr. MCALLISTER. Good morning, Committee Chair, Vice Chair,
Ranking Member. Thank you for the invitation to be here.
My name is Clarence McAllister. We are a successful
graduate of the 8(a) program. I am also an immigrant. I came to
this country 30 years ago and obtained a great education,
started a company. We did become MB certified, DB certified,
and found that those programs were not able to allow us to grow
the company. So the next step was Federal contracting.
I started the business in 2000. In 2008, we applied for the
8(a) program. It took us a year to get our application approved
to the program. And once we got started in the program we
realized that we did not have the expertise to do Federal
contracting, so we had to join several networking groups, like
the Society of American Military Engineers to become familiar
with Federal contracting.
Phoenix is not a large city for Federal contracting so we
had to travel to states like California. Neighboring states,
California and New Mexico, Texas, and visit military bases off
the beaten path and we were very successful at it. We grew the
company substantially, fourfold. We had two Mentor-Protege
Programs. They have helped us substantially in growing the
company, increasing our bonding capacity as a construction
company, and obtained contracts that on our own we would not be
able to qualify successfully. So the MPA program I believe
definitely should be expanded and the SBA should perhaps serve
as a matchmaker between 8(a) companies and potential mentors as
well.
We transitioned out of the 8(a) program 2 years ago when we
graduated, and I have heard figures that 90 percent of 8(a)
companies are out of business 2 years after graduation. So we
are 2 years past graduation. And we started that transition
process early on, and some of the tools, the paths that we
utilized are, one, we applied for several IDIQs, Multiple Award
Task Order Contracts that were 5 years in length. So by the
time we graduated we still had 3, 4, 5 years to compete. We
were very successful at that. So after year 9 we are still
competing for some of those 8(a) contracts that we got awarded
when we were 8(a).
We are moving to the HUBZone. We believe the HUBZone is a
great program. If you are not 8(a), I believe the HUBZone is
the second best program. And we are moving to a neighborhood
that needed some help. We hired employees from that
neighborhood and we are successfully pursuing HUBZone contracts
right now.
The first strategy was to mentor newly 8(a)s and we have
been successful at that. Our first contract as an 8(a) took us
about 2 years to get. We mentored an 8(a) company and they have
gotten their 8(a) contracts in the first year. So there is
definitely some benefit to that.
I submit that even though minorities have indeed entered
the economic mainstream, the net worth or average minority
household is only a fraction of that of white households.
According to Forbes Magazine, the median white household owns
86 times more wealth than its black counterpart and 68 times
more than its Hispanic counterpart.
Even though the 8(a) program is not a solution to America's
inequality, I believe it is a tool to assist minorities be
successful, hire more minorities, and upgrade our communities.
Thus, the 8(a) program should not be eliminated. It should be
strengthened. And I do have some recommendations for that.
One, extend the 8(a) program beyond 9 years because it
usually takes 5 years for an 8(a) contractor, at least in my
field in construction, to obtain the bonding capacity
experience to be able to qualify and compete for larger
contracts. So 9 years is not enough.
Federal construction contracts over $100,000 require
bonding. Most 8(a) contractors are not able to build that
equity in the business to be able to bond larger contracts
unless they are into Mentor Protege, for example.
Expedite the application process. I believe that just
recently in the last couple years it is now online and takes
less time but I am still hearing about 6 months, 8 months for
approval.
Provide legal assistance to 8(a) contractors. If you are an
8(a) contractor and you do not know the FAR, you can get in
trouble very easily. And it is something that most attorneys
are not even qualified for.
And access to capital is very important as well.
Thank you very much for your time.
Mr. EVANS. Thank you, Mr. McAllister.
Ms. Askew, you are recognized for 5 minutes.
STATEMENT OF REBECCA ASKEW
Ms. ASKEW. Thank you.
Vice Chair Evans, Ranking Member Chabot, Chair Velazquez,
and members of the Committee, I would like to thank you for the
opportunity to testify before you today.
My name is Rebecca Askew and I am CEO and general counsel
of Circuit Media located in Denver, Colorado. We provide
competitive intelligence to business and legal professionals
through print and online media. I am also on the Leadership
Advisory Counsel for Women Impacting Public Policy (WIPP). WIPP
is a national, nonpartisan policy organization advocating on
behalf of women entrepreneurs.
I started Circuit Media, like most entrepreneurs, in my
basement. Now my company has grown to 60 employees with offices
in Denver and D.C. I am testifying today about a program that
has contributed to my success, the Small Business
Administration 8(a)'s Business Development Program.
The 8(a) program has given my company access to Federal
contracts that would not otherwise have occurred. However, I
think it is important to make something clear: this program is
a hand up, not a handout. As the SBA states, the mission of the
program is to help provide a level playing field for small
businesses owned by socially and economically disadvantaged
people or entities. Now in my seventh year of the program, I
have been strategic in ensuring that I balance contracts both
in and out of the program. Having this balance has resulted in
my success in the 8(a) program and creating a sustainable
company.
While the 8(a) program has allowed me to find a successful
path forward, I know many companies have not had the same
experience. One of the downfalls for any company is over
relying on 8(a) contracts while in the program. This results in
difficulties when it is time to transition out of the program.
Many companies go out of business, sell, or reinvest themselves
to stay small.
One of the ways the Small Business Administration is trying
to tackle this issue is through the 7(j) Management and
Technical Assistance Program. Although this type of training is
valuable, it would be beneficial for the SBA to consider having
two tracks: one for businesses who are in the beginning phases
of the program and one that is more advanced for businesses
nearing graduation.
Since the 8(a) business development program is only 9
years, a solution is to make sure that other SBA socioeconomic
set-aside programs are available for companies post-graduation.
Proposals such as H.R. 190, which passed out of the
Committee earlier this year, would allow other socioeconomic
programs--women-owned, service-disabled, veteran-owned, and
HUBZone to take advantage of increased access to sole source
contracts.
By making these set-aside programs similarly accessible to
Federal agencies, graduated 8(a) companies could continue to
effectively utilize this set-aside strategy after transition
out of the program.
Another challenge for 8(a) businesses is to take full
advantage of the program during the first years of the program,
otherwise known as the developmental stage. Government
contracting requires a company to have significant business
development and financial acumen. Young companies may not have
the internal infrastructure to compete for and perform on
government contracts. Given the length of time it takes for an
agency to become familiar with a contractor, changing the
criteria for acceptance into the program could help attract
companies that can fully utilize the program at the time of
entry.
I have greatly appreciate the opportunities afforded to me
through my participation in the 8(a) program and have made a
concerted effort to extend these awards to my employees and my
community. As a certified green company, Circuit Media has
developed and funded campaigns educating businesses and schools
across the country on the benefits of recycling and reduction
in paper towel usage. In addition, we donate time, money, and
services to the Trust for Public Lands, Leave No Trace, and
Denver's Highline Conservancy.
We have established an internship program for at-risk youth
who attend Denver Public Schools and offer our employees
tuition reimbursement and paid time off to volunteer in the
community.
In conclusion, the 8(a) program has been beneficial to my
growth, and as this Committee examines the program, I would
urge you to consider my recommendations.
Thank you for inviting me to testify at this important
hearing and I look forward to answering any questions. And I
will yield my time.
Mr. EVANS. I thank you, and we appreciate you for all the
information you have shared with us.
The Chairwoman has done a fantastic job in putting this
together so I want to not mess up for her, so I want to be
clear.
So what I would like to do is begin by yielding myself 5
minutes. I would like to start off with Mr. Thomas.
Mr. Thomas, the government has the goal of awarding 5
percent of all eligible prime contractors of socially and
economic disadvantaged small businesses. Agencies get credit
for 8(a) small disadvantaged businesses and non 8(a) small
disadvantaged businesses like 8(a) guarantee.
While this information is available through the Federal
procurement data system from a review of the annual scorecard,
it cannot be determined what percentage of Federal spending
dollars 8(a) firms are receiving. Would it make sense to
require SBA, Small Business Administration to report 8(a)
specific data in the scorecard? If so, how would such data help
make a better understanding of the 8(a) program?
Mr. THOMAS. Let me say yes. The 8(a) information should
definitely be included and added to the scorecard. First of
all, you have to know as much as you can about what is
happening in the 8(a) program in order to assess it, in order
to assess its needs. I had a boss, one of the NASA
administrators used to say if you cannot measure it, you cannot
manage it. And so if we can gather as much information that we
can on the 8(a) contractors and what contracting dollars they
are getting we can have something to improve on.
Secondly, yes, I think it should be made part of the SBA
score because when you keep a record of anything in terms of
numbers they tend to improve each year.
Mr. EVANS. Thank you.
I would like to go to Ms. Li. As an 8(a) participant, have
you been able to receive training in areas such as marketing
through the 7(j) program? If so, what has your experience been
with the training? And then I am going to add a follow up so
you can think about that. What should improvements be made in
the training program?
Ms. LI. Thank you, Mr. Vice Chair Evans. Pardon me. My bad.
Thank you, Mr. Vice Chair Evans. Yes, I have received some
training through the 7(j) program thanks to the SBA official
who made me aware of those programs. And I took part in some
training. They were helpful, yet I believe they would be better
off if they were offered in person, as a group, or one-on-one.
I believe those programs would be much better beneficial if
they could conduct that for a group of entrepreneurs like us
and coming to our facilities to provide those training.
Mr. EVANS. Mr. McAllister, currently, individual-owned 8(a)
small businesses can receive sole source wards of less than $4
million for goods and services. The current Administrative
Office of Government Contracting said in 2017 that increasing
the 8(a) sole threshold is one way SBA would make a special
gain. Do you have any thoughts on this statement whether
Congress should, in fact, increase the 8(a) sole source
threshold?
Mr. MCALLISTER. Yes, I do agree that the sole source
threshold of $4 million should be increased. If you look at,
for example, the small business size, I believe in the last
year all of them or the majority of them were increased. In my,
for example, my NAICS code, 236220 for construction, it used to
be capped at $33.5 million and it is now at $36 million for a
small business size. So we have an increase in cost of living
and other expenses going up and these small business 8(a) sole
source remains at $4 million where you have the ANC companies,
Alaska Native Corporations with $20 million sole source limits
as well. So I do believe that for 8(a) companies, the sole
source limits should be increased beyond $4 million.
Mr. EVANS. Thank you. My time is now expired, and the
Ranking Member, Mr. Chabot, is now recognized for 5 minutes.
Mr. CHABOT. Thank you, Mr. Chairman. And Ms. Askew, I will
begin with you.
Given the short timeframe for participation in the program,
9 years, what can the SBA do to ensure that these 9 years are
the most beneficial to 8(a) participants?
Ms. ASKEW. Thank you, Ranking Member Chabot.
So I am in Denver and we have an amazing SBA program. They
have really been on the ground and working with me from day
one. I do not believe that that is the same experience that
other 8(a) organizations have within this United States. I know
one of my colleagues who do not even have a business
opportunity specialist attached to them. They just call the
phone and hopefully someone will respond and help them. So I
think that uniformity in assistance and training right from the
bat is very valuable, and I also believe that getting to
understand how the SBA works, how they support you throughout
the program I think is vitally important. You know, it took me
months to really understand how the whole * there is quit a
bureaucracy for lack of better words in trying to understand
who helps you with what and how does that pan out. And I really
believe that that would be valuable as well. Thank you.
Mr. CHABOT. Thank you. It is great to hear that the program
in Denver is so good. And we would hope, and I think this
Committee, we would want to aspire to have the programs all
across the country so everybody can benefit. And if their
program does not meet the standards that you found, we ought to
try to work towards that. And that is something that we can do
in a bipartisan way I would hope.
Mr. McAllister, I will move to you next. How long did the
entire application process take from the first application
submission to receiving the 8(a) certification notification?
Mr. MCALLISTER. Well, the first notification probably took
about 6 months. I was told that you always are going to get
some comments. So it took me about 6 months. And then the final
approval took about a year. And now this is 11 years ago.
Mr. CHABOT. Okay. Thank you.
Could you describe the application process so we can kind
of, some of the folks who may not be familiar with it can hear
what it is like, and are there any improvements that you would
recommend so that others might maybe have an easier process
than others?
Mr. MCALLISTER. Yeah, well, again, it was all paper-based
back then. One of the requirements was to have 2 years in
business, which I thought is a great idea. You do not want to
have a new startup getting into the program where they are not
able to take full advantage of it. So 2 years was the minimum
requirement. Beyond that, things like net worth, there were
some minimum which I believe that they should be increased as
well. Same with the sole source requirements. And the process
involved basically filling out lots of paperwork and what you
have done in the last 2 years, your experience. Where you got
funding from. Make sure that basically you bootstrap the
company because as an 8(a) company you are not allowed to have
investors, outside investors. So in some instances, I know
companies who have struggled for 2 years and really minimal
revenues just to qualify to an 8(a) program. We applied 7 years
in business. We were in business for 7 years, so we had a good
track record. We had a bonding capacity. We had customers
already in place. So by the time we got approved for the
program we were ready to grow. But it was definitely very
extensive. I have been told that now the program is online and
it is taking less time. But I have not had experience with that
in the last couple years.
Mr. CHABOT. Excellent. Thank you very much.
Ms. Li, do you feel the 8(a) program adequately prepared
you to compete against larger, more established firms?
Ms. LI. The short answer is no. I think by the time we
received the 8(a) certificate I was not ready for a lot of
bureaucratic items and things that are within the system. I
believe, again, refing to my testimony, things are in the
system that are just preventing people from moving forward. And
so that is another reason for my recommendation to eliminate
and reduce some of the gap between the policy and operation.
Mr. CHABOT. Excellent. Well, we should definitely strive to
improve the program, so all can benefit from it.
Mr. Thomas, unfortunately, I ran out of time before I got
my question to you. You would have been next and it would have
been a great question.
Mr. THOMAS. The story of my life.
Mr. CHABOT. I yield back, Mr. Chairman.
Mr. EVANS. I would like to thank the Ranking Member, and go
to someone who I have watched, and she has done a fantastic job
and she is Representative Davids from Kansas. You have 5
minutes.
Ms. DAVIDS. Thank you.
Well, first, I am excited to be able to participate in this
hearing today because the 8(a) program presents a unique and
valuable opportunity for small businesses to compete for
valuable Federal contracts.
The recent decrease in participation in the program has
been discouraging and I hope we can address some of those
issues here today.
The Small Business Administration did try to increase
participation through streamlining the application process. I
do worry though that that streamlining may have eroded some of
the safeguards that ensure that we have proper certification
and eligibility for the program.
Recently, I have been more concerned about the issues that
have come to light about eligibility requirements for Native
American contractors participating in the 8(a) program, and
hopefully in the future our Committee will be able to examine
some of those issues more in-depth.
The first thing I would like to do actually is follow up on
the previous question that the Ranking Member was bringing up
which is, Ms. Li, I would love to hear a little bit. You know,
I am often concerned about the barriers to participation but
then also once you have participation we want it to be a
successful program. So I would love to hear a little bit more
about when you say, no, the program did not necessarily help
compete against the bigger firms, can you give us a couple of
concrete examples of that? I think that those are often the
best ways for us to be able to make good policy arguments.
Ms. LI. I believe when a big firm, a well-known firm, I am
not going to give any names, when they walk into an agency,
agencies tend to respond to them better. And we may be an
unknown entity even though we have been performing excellent
work within the same agency, yet they tend to gravitate toward
this big name firm. And yet, we are left behind. Left on the
sideline. We are not being considered just for the mere fact
that we do not have the capacity as these large firms do or
seem to have, yet we perform such a niche service that
addresses these agencies' problems. We solve a problem and
these large firms cannot really compete with us. However, we
are missing the opportunities to get into the game.
Ms. DAVIDS. Thank you.
And that actually I think helps with even understanding
sometimes some of the barriers speaking of folks understanding
and knowing about the 8(a) program. I wonder if Mr. McAllister,
I will start with you. If you could speak to some of the
barriers of the program. You already brought up a couple of the
things which were, I mean, the question that brought out the
threshold increase was insightful and then you mentioned
bonding and also an increase in the number of years for the
program. I would love to hear a little bit more from you about
either barriers to the program or also once you are in the
program what some of the improvements we could see are.
Mr. MCALLISTER. Well, certainly, like I said, the Mentor-
Protege Program is a good program. If you cannot compete with
the big boys you may as well join them; right? And that is what
we have done. We never go after, I guess, a large company. It
is a losing battle. And most large companies are looking for
smaller companies to team up to do Mentor-Proteges with as
well. So that is one of the things that could be done to be
more competitive.
I believe that a purpose of the 8(a) program is to allow
companies when they graduate to be successful outside of the
program, and we found that outside of the Federal programs we
have not been given the opportunity. When we started the
company it was difficult to compete in the commercial sector.
We went to the Federal market to build that capacity and after
we exited that we found that it is still challenging because we
do not have those networks, those connections on the private
sector to compete, so we are still challenged in that regard.
We still continue to do that but what we have done is stay in
the Federal market, do the HUBZone program, some of the other
programs, but I believe that the SBA should perhaps help 8(a)
companies do that transitioning part better so they can be
successful and we do not have this high level of failure by
8(a) companies after graduation.
Ms. DAVIDS. Thank you.
Mr. Thomas, probably I talked too long, but just I am
curious really quickly, do you feel like the SBA supports
organizations like yours? I mean, I am more familiar with the
Native American Contractors Association, but do you feel like
the SBA is supportive of these organizations so that we can
start to branch out, so we can see them branching out once the
8(a) program has expired?
Mr. THOMAS. Not as much as used to. I remember years ago
when the SBA used to give grants to organizations like ours and
the ones you just mentioned for marketing purposes, for
bringing people to training and things like that, but over the
years it has decreased. And maybe in our next--oh, we still
have time. I wanted to address----
Ms. DAVIDS. We are 30 seconds over. Can I ask that you
submit for the record a little bit more and then I can look at
it?
Mr. THOMAS. Yes. I wanted to address your question about
Native American contractors and certifying with the 8(a)
program, the barriers to them getting in. I have represented
them before.
Mr. EVANS. The time. Thank you.
Ms. DAVIDS. Thank you. I yield back.
Mr. EVANS. What I would like to do now is recognize the
gentleman who is the Ranking Member of the Subcommittee on
Contracting and Infrastructure, Representative Pete Stauber
from Minnesota.
Mr. STAUBER. Thank you, Mr. Chair.
I just have a few questions. Ms. Askew, you know, I am
particularly impressed with one of the lines in your testimony
today, that the 8(a) is a hand up, not a handout. As a small
business owner myself, I know how important the SBA programs
are in helping our small businesses grow and thrive, but you
are so right. The government is, or at least should be here to
assist in times of need, not hold your hand cradle to grave but
rather give every American small business owner the opportunity
to be independently successful.
An item that was highlighted in the 2016 OIG report was
declining participation in the 8(a) program. Two questions. How
do you feel we best keep the program thriving without
encouraging people to be reliant on the government? And then
what can we do better to market the 8(a) program as a stepping
stone to independence?
Ms. ASKEW. Thank you for your questions.
I think that my colleagues here at the table have talked a
little bit about some of the issues and the barriers in regard
to why organizations might not choose to become part of the
8(a) program. It is not an easy task to get into the program.
And once you do, there is that period of time that you need to
navigate through the information in order to get to those
nuggets. We really consider * I consider the 8(a) program as
just basically a fishing license. I got a fishing license and
now I need to go out and figure out how to fish and which
waters I should fish.
Mr. STAUBER. And you can fish any of the 10,000 lakes in
Minnesota.
Ms. ASKEW. That is right. And I have, actually. So that is
definitely, you know, a very positive thing. And I think that
part of the things that we have seen in regards to how do you
get to be--it is a huge morass of businesses and agencies and
how do you get in front of those and make that impactful
impression when you have many companies that have full-time
business development folks in the D.C. area constantly knocking
on everyone's doors.
So it does, I think, to Ms. Li's point of making sure you
differentiate yourself is definitely a way in which you can not
only be seen by agencies but also be sustainable. And that is
certainly the impact that you are wanting.
Mr. STAUBER. During the application process, give us a
sense of how you went through it and was it difficult? What
areas can we improve on or you know, shorten that process up?
Ms. ASKEW. Sure. So Mr. McAllister did mention that it used
to be a paper process and it is currently more of an electronic
process. And I think that that has improved, certainly improved
the capabilities. It is now in plain English. So instead of,
you know, many of the times when I was filling out my initial
paperwork I was not even clear myself and, you know, I have an
advanced degree what was being asked for. And I think that the
process now has become more simplified and able. I just did my
renewal and, you know, I could understand the questions. And it
was linear in process so I could fill out the paperwork and
manage those hurdles a lot easier than when I was first filling
out the paperwork.
Mr. STAUBER. One of the comments that we seem to get in the
Small Business Committee is some of these applications can be
tedious and cumbersome and really hard to navigate so it is
nice to see that it is starting to become less intrusive on the
small business owner so they can fill it out themselves rather
than hire outside help which obviously can be difficult.
Ms. Li, you talked about, I think you mentioned the
handout, the contracts to the bigger contractors or what have
you. So what should we be looking at in order to allow that
small business owner to be on that same footing when the
decisions are made?
Ms. LI. Thank you. That is a great question.
There should be some kind of systematic training, a long-
term training for all people who are involved. And not just the
contracting officers but programming and project management.
Everyone who touches contacts, those people have to be trained
so they understand their roles and responsibilities as well as
the functions they need to play when it comes to awarding a
contract to a large or small. So 8(a)s should be in the
picture, should be part of the process.
Mr. STAUBER. Well, thank you very much.
And Mr. Thomas, I was going to ask you a question. It was
going to be better than the Ranking Member's but I am out of
time. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the Chairwoman of the Subcommittee on
Investigations, Oversight, and Regulations, Ms. Chu from
California, for 5 minutes.
Ms. CHU. Thank you so much.
I am so pleased that all of the panelists are here, but in
particular, Dottie Li. I have known her for over 2 decades and
she is such a great leader in the community. So thank you for
being here.
And I would like to applaud the work that your company does
in helping non-Native English-speaking speakers become more
effective communicators. I believe it is so critical that we
educate our business and Federal agencies in cultural
competency, especially as more and more of our economy relies
on a workforce from diverse backgrounds.
So I would like to follow up on your story, first on the
frustrations you had on certification and then the hurdles that
you faced as you tried to secure a government contract through
the 8(a) program. It is important to recognize that your
business had already contracted with a long list of Federal
agencies. So we know that your services have been in demand.
But now one year into your 8(a) certification your business has
not secured a Federal contract through the program. These
circumstances, however, are not unique. In fact, Mr. Thomas
noted in his testimony that many participants never receive an
8(a) contract during their entire tenure in the program. But
with one-time eligibility and a 9-year window to participate,
it is important that firms can take full advantage of their
time in the program.
So Ms. Li, can you talk about the certification process and
what things you would do to improve it, but also talk about how
you would improve the process of getting a contract? You refer
to some things about improvement such as the need for a check-
in mechanism and a need to improve the vendor outreach sessions
and a need to strengthen the mentorship program. So first, the
certification.
Ms. LI. Thank you. Thank you, Representative Chu. It is
wonderful to see you today.
The certification process for us was long and lengthy as I
alluded to. I was blessed to have many people who provided
their support and expertise, and my counselor, Mr. Richard
Peyton is here from P-TECH, Maryland P-TECH, and director
Denise Warner is also here. She runs the P-TECH program. And
Mr. Peyton has helped me tremendously through that process. I
did not have to pay someone to provide the service. And as well
as other entities, SDBC and some folks who are former SBA
officials who provided tremendous support in that process.
And during the waiting game I spotted Mr. Rob Wong.
Ms. CHU. But what would you do to improve it?
Ms. LI. What do I have to do? I would say that the online
process right now, even though it is improved by a lot from the
paperwork days, however, it is just too cumbersome for anyone
to go through. There are times where the language is not clear.
There are times that the steps are not clear. How would you
interpret something when you do not even understand the
language? That was the process and it was frustrating. I was
able to eventually get through to folks who intervened to get
to the person who needed to help us.
Ms. CHU. and then you said in terms of getting the contract
there are certain things that needed to be improved, like the
vendor outreach sessions. Could you say something about that?
Ms. LI. Absolutely. I love going to these vendor outreach
sessions. I always have the best time meeting with different
agencies and they have those matchmaking sessions. It is sort
of like speed dating, not that I would know anything about it.
And you go from agency to agency. I pitched my story. I have
the full passion to tell them what we do and they promise you
the world. They say come to us and we are going to work with
you. And you send emails and just crickets, nothing afterwards.
Ms. CHU. So how could that be improved?
Ms. LI. I think vendor outreach sessions should be staffed
by contracting people, programming people, not just OSDBU
folks. I think they are great yet we need to talk to program
people directly in order to make a difference, so they can hear
the kind of services we offer.
Ms. CHU. And then you talk about strengthening the
mentorship program. Do you have a mentor?
Ms. LI. I do not really have a mentor. I tried to reach out
to another 8(a) firm for quite some time now at the suggestion
of a wonderful OSDBU person. I do my outreach. I check in with
them. I see them at different functions, yet, again, it is like
a relationship. It may not be jelling yet I am still hoping to
find a mentor who will show us the ropes.
Ms. CHU. So getting that mentorship program going so you
could actually have a mentor is really important.
Ms. LI. That would be critical. That would be critical.
Ms. CHU. Yes. Thank you.
Ms. LI. Could I just add one more? As of yesterday
afternoon we got word from this particular group that our first
8(a) BPA contract is moving forward. So I think it is very
interesting. Timing is everything. The day before I came to
testify.
Chairwoman VELAZQUEZ. Time has expired.
Now we recognize Mr. Balderson, Ranking Member of the
Subcommittee on Innovation and Workforce Development from Ohio
for 5 minutes.
Mr. BALDERSON. Thank you, Madam Chair. And thank you for
the panelists for being here today.
I want to kind of jump around because I have been paying
attention. And Mr. McAllister, this was going to be directed at
you but you talked a little bit about it with the Ranking
Member, so the rest of the panel, if you would kind of jump in
with this question I have. You know, Mr. McAllister talked
about it. He did not apply for this until he was 7 years in
business I believe was the number that you used. How about the
rest of you? Did you jump in immediately or did you wait some
time before you were a little bit more established?
Ms. Askew?
Ms. ASKEW. Yes. Thank you.
We were several years established before we started our
8(a) program.
Mr. BALDERSON. Okay. How were the first couple years? You
wanted to wait a couple years, but what did you do that you
thought was some of the good processes that you went through to
wait for that?
Ms. ASKEW. Sure. We recognize that even if we had gotten a
contract we would not have known what to do with it. We did not
have the infrastructure necessary, the bookkeeping, all of the
things that are required. And so we started on the commercial
side like Mr. McAllister did and started looking for work that
way. And that is actually how we ended up getting the chops to
be able to support a contract once we received it.
Mr. BALDERSON. Okay.
And Ms. Li? Ms. Li, would you like to add anything to that?
Ms. LI. I think the fact that we were able to make an
imprint with Federal agencies, and at least they are aware. And
it is just a matter of doing more work. And that seems to be
getting really old. So I was hoping that the 8(a) program would
give us a tremendous boost right away off the bat but again, it
has taken a whole year, almost a full year. But I am looking
forward to taking full advantage of the program moving forward.
Mr. BALDERSON. Okay. Thank you.
And how long were you in business before you made the
decision to go with the program?
Ms. LI. Ten years.
Mr. BALDERSON. Ten years. Okay.
Ms. LI. Actually, nine.
Mr. BALDERSON. Nine? Okay.
Ms. LI. Right now it is 10.
Mr. BALDERSON. All right. Thank you.
My follow up to all of you, and again, you can all just
jump in and speak up. Beyond extending the program window which
you all talked about, do you believe there is something else
the SBA could do to help foster those early critical years? I
mean, obviously, those are the most important years to get
going, but is there something else out there the SBA could do
to accommodate that?
And Mr. Thomas?
Mr. THOMAS. If I could answer.
Mr. BALDERSON. I would love to have you answer. You were
going to be the first one I was going to say.
Mr. THOMAS. Yes. Yes. I think the most critical is the
marketing. To be in the 8(a) program, it takes a firm to
fiercely market the agencies to get contracts. They have to
figure out where they land. You know, where they stand. What
their status is in terms of what they have to offer. And then
they have to see if the agency is buying that. And then they
have to almost show the agency how they can do it, how the
agency would benefit from using them, from using their niche.
And this is how. And first of all, they have to show the agency
how the agency already buys it and how it would be beneficial,
less costly for them to use them as an 8(a) contractor. And I
have seen many contractors market to agencies and get them to
set aside an 8(a) contract merely from marketing.
But you need training to do that. You need really a good
trained, personalized training because it is not easy.
Everybody does not know how to do it. The businesses that
thrive in the 8(a) program have something very special and that
is the marketing edge and then the performance after that.
Agencies stick with 8(a) companies that they are satisfied
with.
Mr. BALDERSON. Okay.
Ms. Li? Ma'am? Ms. Li?
Ms. LI. Yes?
Mr. BALDERSON. Did you want to follow up with anything with
that? Or Mr. McAllister, or Ms. Askew, would you like to?
Ms. ASKEW. Yes, absolutely.
One of the things that have not been mentioned today are
that the SBA has a program called the Emerging Leaders Program.
And I think it would be wise if it was coupled with the 8(a)
program. It was an amazing program for me. It was like a mini
MBA. Great opportunity. I learned so much about the government
arena, and I think coupling that with the 8(a) program
requiring 8(a) companies would assist them in the long run.
Mr. BALDERSON. Emerging Leaders? Is that from the SBA?
Ms. ASKEW. It is the Emerging Leaders Program.
Mr. BALDERSON. All right. Thank you.
And Madam Chair, I yield back. Thank you all very much.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now I recognize the gentleman from Florida, Mr. Spano, for
5 minutes.
Mr. SPANO. Thank you, Madam Chair. I apologize. I got to
the meeting late.
I want to direct a couple questions to Mr. McAllister. If
the questions were asked already I apologize in advance. One of
the things that we did back at our Chamber of Commerce back
home was to develop a mentorship program for young people,
right, because we understood, especially for economically
disadvantaged young people to try and teach them what it is
like to hang around a small business, you know, and give them
an idea of whether or not they want to do that someday, right,
start their own business.
So the challenge that we had though was that it was tough
for us to find mentors. And I think a question just a moment
ago, I believe it was Ms. Li about, you know, whether or not
you have been able to find a mentor so far. So I guess my
question is, what do you think that the SBA could do better if
you have any suggested solutions, to encouraging mentors, more
mentors to participate?
Mr. MCALLISTER. Well, I think it is easier to find mentors
in the community to mentor youth. From the SBA-MPA program, a
Mentor-Protege is like a marriage. Or like dating. And then we
establish a joint venture under the MPA. That is marriage. So
there is financial risk from both sides, from the mentor and
from the protege.
So like Ms. Li said, it is, you know, let's go out, let's
have dinner, let's have lunch, let's get to know each other. Do
we match with each other? Our cultures? Because, you know,
oftentimes with the Mentor-Protege, the mentors provide
training to the protege staff. So it is not just sign a
document and let's move on. There is a lot to it. So, but what
the SBA can do is perhaps just build that speed dating
environment or dates or sessions with large businesses, or the
agencies can do it as well where large agencies come in with
8(a) companies and just get to know each other. Because in our
case it took us perhaps a year or two to find that right
mentor. And we actually had one, the first one did not work out
at all. They were all for getting one contract that they had
that they were incumbent and they wanted to recompete and they
seeked us just for that. And when that fell through, the
Mentor-Protege went away. So it took us about a year to find
another mentor, and we have had three mentors. Two, one at the
8(a) and one at the HUBZone program. We take start to get to
know each other and find the right match.
Mr. SPANO. And if I may just ask a follow up. So relating
to the Mentor-Protege Program, if you could say one thing that
from your experience as a mentor and as a protege, one thing
that you can think of that comes immediately to mind that
really works well and one thing that you say probably needs
work?
Mr. MCALLISTER. Well, the training works well. You can find
the right match, the right mentor and you have needs, say in
accounting, marketing, payroll. They can help you with that.
What does not work well is perhaps the red tape that is
involved with it because you apply for the 8(a) program and
then you have your annual 8(a) recertifications and you have to
apply for a Mentor-Protege which oftentimes can take months as
well. And then every year you have to recertify that Mentor-
Protege. So I think generally it is the red tape that is
involved with both the 8(a) and the Mentor-Protege Program that
just needs to be streamlined.
Mr. SPANO. And you mentioned in your testimony that most
8(a) contractors do not gain momentum in the program until
around their fifth year. Is that a result in your opinion of
some of the red tape that is associated with the program?
Mr. MCALLISTER. I think it more than anything is find the
right match in terms of customers. Here in the D.C. area, all
the Federal agencies are here. Out West we do not have that
plethora of agencies, so I think it is finding that right
customer, that right agency that can give you a shot. You know,
that first opportunity, and then be able to grow with them. In
our case, we had to go out of our comfort zone, out of Arizona
to go into Colorado, Texas, New Mexico, and oftentimes into
areas where nobody else wanted to go because it was in the
middle of nowhere. But there was a Marine base there or an Army
base there that needed our services. And that is what it takes
perhaps for the 8(a) companies to have that. First of all,
somebody to tell them where to go because the phone is not
going to ring wanting to become 8(a). Their phone is not going
to ring. It is a fishing license and you have to go out and
fish.
Mr. SPANO. Thank you, sir.
Madam Chair, I yield.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now I recognize myself for 5 minutes.
I would like to follow up on Mr. Spano's question.
Mr. Thomas and Mr. McAllister, is there anything more SBA
should be doing to facilitate or incentivize the use of the
Mentor-Protege aspect so that more small businesses are able to
participate and benefit from it?
Mr. THOMAS. One thing that I could suggest is a few years
ago the SBA used to do these matchmaking events to match
contracts with the contractors. Taking that to another level,
perhaps they could have conferences where they have only the
prime contractors who want to be mentors and proteges who are
looking for mentors. You have them in the same room and at
least you are not fishing for goldfish where there is only
seabass. So I think that is something that would give it a
push.
Chairwoman VELAZQUEZ. Mr. McAllister, anything that will
incentivize?
Mr. MCALLISTER. Yeah. I think definitely setting that venue
for that matchmaking to occur. But also the financial support
that a protege can get. The Mentor-Protege allows a mentor to
invest up to 40 percent into an 8(a), into its protege, and I
believe that is a great vehicle. There is a lot of red tape
involved in that. We try to do that and got the runaround and
we just gave up because we have known 8(a) companies, we know
one in particular right now where the owner is taking a second
job because he needs to support himself. And he is being
threatened with getting certified for the program.
Chairwoman VELAZQUEZ. Thank you.
Mr. MCALLISTER. So even if he gets into the Mentor-Protege
Program, he is not able to succeed unless there is some
financial investment from the mentor to the protege.
Chairwoman VELAZQUEZ. Thank you.
Mr. Thomas, the government has the goal of awarding 5
percent of all eligible prime contracts to socially and
economically disadvantaged small businesses. Under this goal,
agencies get credit for all awards given to small disadvantaged
businesses, whether they are 8(a) participants or not. Should
Congress enact legislation to create a goal for the 8(a)
program?
Mr. THOMAS. Yes. I think I have answered this in part
before. But yes, it should. It should.
In case you did not hear that.
Chairwoman VELAZQUEZ. Yes.
Mr. THOMAS. Yes. The answer is yes. Because to determine
the success of a program you want to get as much information
about how the program is working as possible. And it only
stands to reason to know how much business that 8(a)s are
getting. It is not hard to gather information because they can
get it easily.
Chairwoman VELAZQUEZ. Do you think that this will
incentivize agencies to contract with 8(a) firms if we increase
the firms?
Mr. THOMAS. Well, yes. Even if you make a goal, regardless
of what you put in the goal, when you are measuring someone on
a certain basis, the numbers go up because nobody likes not to
meet a goal. So whatever that goal is, I think you will see the
numbers go up.
Chairwoman VELAZQUEZ. Do any other members of the panel
want to comment on that? Ms. Li?
Ms. LI. Before we became an 8(a), I always heard people
would say if you were an 8(a) we would give you the contract.
And now we are an 8(a) and they say, if you were a HUBZone, we
would give you the contract. So you just end up chasing the
endless loop. And so where do you actually get yourself being
recognized as a formidable force so that people could really
work with you?
Chairwoman VELAZQUEZ. Okay.
Mr. MCALLISTER. Yeah, I believe that that goal should be
specific for 8(a) programs. That way the 8(a)s are not just
lost in wait.
Chairwoman VELAZQUEZ. Thank you.
Ms. Askew?
Ms. ASKEW. Yes, thank you.
I would agree with Mr. McAllister. I do think that there is
value in that and back to what Ms. Li said about educating
cores and contracting officers so that they understand how to
utilize the program well, I think there is a problem in that
area as well.
Chairwoman VELAZQUEZ. Thank you.
There is another issue that I want to discuss with you, and
that is that the SBA 8(a) program has a personal net worth
limitation of less than $250,000 for initial eligibility and
$750,000 for continued eligibility. This limitation has been in
place since the late 1980s. The DOT also has a Disadvantaged
Business Enterprise Program, and in 2011, increased the
personal net worth threshold for eligibility to account for
inflation.
What are your thoughts on increasing the 8(a) net worth
limitation and adjusting it for inflation?
Mr. Thomas?
Mr. THOMAS. Well, yes, of course. It needs to be adjusted.
I mean, for any other program it would be adjusted. And we are
keeping good people out because they do not want to come down.
They do not want to adjust their business lives to come down,
to come under $250,000 because it would not be worth it. And it
just makes natural business sense to raise it, at least for
inflation if not beyond that.
Chairwoman VELAZQUEZ. Thank you.
Any others who want to comment?
Ms. LI. I tend to agree in principle that adjustment should
be made for inflation. I do not have a problem with increasing
it. However, I am a participant. I am a cross-cultural
communication specialist. I am not an economist. So I think in
an economic survey of some sort has to be conducted to
determine how much to increase and when to increase.
Chairwoman VELAZQUEZ. Thank you.
Mr. MCALLISTER. Those limits should be increased like
everything has increased in the last 30 years. Agreed.
Chairwoman VELAZQUEZ. Thank you.
Ms. Askew?
Ms. ASKEW. Yes, thank you.
I would say that the corresponding NAICS codes, the amount
that awards can be have increased, so it would make sense that
this would also be increased.
Chairwoman VELAZQUEZ. Thank you.
Ms. Li, the 8(a) program has a 9-year lifespan which is
divided into two phases, an initial 4 year developmental stage
and a final 5 year transition stage. Is this enough time for a
small firm to fully realize their potential and win contracts
with the government?
Ms. LI. Thank you. Thank you, Chairwoman. That is such a
great question. The short answer is no. Clearly, from my fellow
panelists and our own experiences have shown that the first 4
years are critical for you to understand, to grow, to be
trained, to be mentored in order to fully understand the
process. So by the time you actually understand a little bit
more that we are in this process, 4 years are already gone.
Chairwoman VELAZQUEZ. Thank you.
Ms. LI. And then you have to graduate or transition out of
the program.
Chairwoman VELAZQUEZ. Any of the members of the panel can
comment on this question. Do you have any suggestions on how to
improve either the 4-year developmental stage or the 5-year
transition stage?
Mr. MCALLISTER. Well, I think that it probably should be
increased over 9 years for starts because 9 years is not
enough. So perhaps 10 years and make it 5 years developmental
and 5 years transition or something along those lines. Just a
little bit more time to get traction before they start that
transitional stage.
Chairwoman VELAZQUEZ. Thank you. Any other comments? Ms.
Askew?
Ms. ASKEW. Yes, thank you. I do know that we are in the
transition stage currently and they require us to make sure
that we have a certain blend of 8(a) and non 8(a) work at this
point. And so it makes it hard because once you just start
wrapping up it is time to ramp down in terms of the amount of
8(a) work. So you have to be cognizant of your balance and that
makes it difficult.
Chairwoman VELAZQUEZ. Thank you.
Let me take this opportunity to thank all of you for taking
time out of your busy schedule to be with us today.
The 8(a) program is the hallmark of all contracting
programs managed by the Small Business Administration. Not only
is it the oldest but it is the one in which the agency has the
most expertise. Now, just as 40 years ago, the program remains
equally important because of the impact it has on enhancing
minority entrepreneurship and strengthening the federal
marketplace.
I want to thank our witnesses for offering their valuable
insights today and I look forward to working with my colleagues
on both sides of the aisle on ways to improve the 8(a) program.
With that, I will ask unanimous consent that members have 5
legislative days to submit statements and supporting materials
for the record.
Without objection, so ordered.
And if there is no further business to come before the
committee, we are adjourned. Thank you.
[Whereupon, at 12:51 p.m., the committee was adjourned.]
[Mr. Clarence McAllister did not submit his responses in a
timely manner.]
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